All infra projects to be revenue operational in current financial year: Lalit Jalan

Written by Shubhra Tandon | Aveek Datta | Updated: Jun 27 2014, 07:17am hrs
Reliance Infrastructure (R-Infra) is once again looking at EPC (engineering, procurement, and construction) contracts from external sources other than the group companies, and is in talks with banks to take over the road projects abandoned by their existing developers for want of liquidity. The Anil Ambani-led Reliance Groups infrastructure arm has had its share of trouble with a number of infrastructure projects it was awarded. It quit the Delhi Airport Metro project over differences with Delhi Metro Rail Corporation. The first phase of Mumbai Metro became operational only last week, eight years after work began, with several delays. In an interview with Shubhra Tandon & Aveek Datta, R-Infras chief executive Lalit Jalan said that despite challenges, the company is poised for the next phase of growth in almost all the businesses it operates. Excerpts:

With a number of infrastructure projects you were awarded failing to take off and the EPC order book running out, where is the next phase of growth for R-Infra coming from

All our projects will be revenue operational in the current financial year. That means all power transmission and distribution, Metro, road and cement projects will be operational and will start generating revenues.

Phase two of growth will come from most of these businesses. Power distribution, which is R-Infras biggest vertical, will grow organically with revenues growing 10% a year. There will also be a scope for inorganic growth in states where the government cannot fix the power distribution infrastructure on its own and private sector involvement is a must. It has already been said that power distribution in 255 towns have to be privatised, like in Delhi. We have a 50% share of the private sector power distribution market at present and with our skills of running world-class utilities, we are well placed to gain from this.

In power generation, all the growth will be in Reliance Power and we will benefit in proportion to our 42% shareholding in the company. In power transmission, we have three assets today and the mandate to put all future projects out on competitive bidding is very clear. The government and private sector should be treated equally in terms of right of way and other clearances. It took us three years to get clearances for some of our transmission projects, which were supposed to be finished in three years. So force majeure had to be invoked for these projects, on time and cost escalation. Going forward, hopefully projects to be awarded will be pre-packaged with all approvals in place.

Most of your order book in the EPC business have run out. So where do you see new orders coming from

In EPC, the first phase of projects will be completed this year. Our next phase of growth will come from external and internal sources. Externally, we had stopped looking at projects as our hands were full with group company orders. Now we have a team in place to look at external projects once again on selective basis within and outside India. Internally, if we bag the orders for Reliance Powers planned expansion at Sasan and Chitrangi, along with the orders we have for its Tilaiya thermal power, and other hydroelectric and renewable projects, it will bring our order book back to R30,000 crore in no time.

There are a lot of stressed road assets up for sale. Are you looking to acquire some of them

In roads, all our 11 projects will become operational this year and traffic growth is showing signs of improvement in the last few quarters. We are looking at a lot of new projects that are going to come up. There are talks of 5,000-5,500 km of new roads being planned in the country and that is a big opportunity. There are also a lot of stressed assets and banks have been calling us to gauge our interest to see if we will take over some of these projects. We are evaluating them at the moment.

There are some projects which the original promoters had left midway since they ran out of equity to put into these projects. We are scouting for such assets valued at around R3,000-4,000 crore. We hae to negotiate with banks on how much equity we can bring in and how much debt they are willing to forego.

Are you comfortable with the debt situation of the company

Most of the companys debts are backed by assets that have been put on the ground and are going to earn revenues for us. At 0.9:1, Our debt-to-equity ratio is one of the best among infrastructure companies.

How do you expect Mumbai Metro, which has just started, to perform

We expect it to achieve break even in the initial years of operations itself. When exactly that would happen depends on factors like passenger traffic.

Are you planning to offload an equity stake in any of your projects

Monetisation has been our mantra, but not at a throwaway price.